Black & Decker 2011 Annual Report Download - page 86

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74
COMMON STOCK RESERVED — Common stock shares reserved for issuance under various employee and director stock plans at
December 31, 2011 and January 1, 2011 are as follows:
2011
2010
Employee stock purchase plan ................................
...........
2,808,891
2,956,667
Other stock-based compensation plans
..............................
2,643,113
5,035,575
Total shares reserved ................................
..........................
5,452,004
7,992,242
PREFERRED STOCK PURCHASE RIGHTS — Each outstanding share of common stock has a one share purchase right. Each
purchase right may be exercised to purchase one two-hundredth of a share of Series A Junior Participating Preferred Stock at an
exercise price of $220.00, subject to adjustment. The rights, which do not have voting rights, expire on March 10, 2016, and may be
redeemed by the Company at a price of $0.01 per right at any time prior to the tenth day following the public announcement that a
person has acquired beneficial ownership of 15% or more of the outstanding shares of common stock. In the event that the Company
is acquired in a merger or other business combination transaction, provision shall be made so that each holder of a right (other than a
holder who is a 14.9%-or-more shareowner) shall have the right to receive, upon exercise thereof, that number of shares of common
stock of the surviving Company having a market value equal to two times the exercise price of the right. Similarly, if anyone becomes
the beneficial owner of more than 15% of the then outstanding shares of common stock (except pursuant to an offer for all outstanding
shares of common stock which the independent directors have deemed to be fair and in the best interest of the Company), provision
will be made so that each holder of a right (other than a holder who is a 14.9%-or-more shareowner) shall thereafter have the right to
receive, upon exercise thereof, common stock (or, in certain circumstances, cash, property or other securities of the Company) having
a market value equal to two times the exercise price of the right. At December 31, 2011, there were 163,465,561 outstanding rights.
STOCK-BASED COMPENSATION PLANS — The Company has stock-based compensation plans for salaried employees and
non-employee members of the Board of Directors. The plans provide for discretionary grants of stock options, restricted stock units,
and other stock-based awards.
The plans are generally administered by the Compensation and Organization Committee of the Board of Directors, consisting of non-
employee directors.
Stock Option Valuation Assumptions: Stock options are granted at the fair market value of the Company’s stock on the date of grant
and have a 10-year term. Generally, stock option grants vest ratably over four years from the date of grant.
The following describes how certain assumptions affecting the estimated fair value of stock options are determined: the dividend yield
is computed as the annualized dividend rate at the date of grant divided by the strike price of the stock option; expected volatility is
based on an average of the market implied volatility and historical volatility for the 5 year expected life; the risk-free interest rate is
based on U.S. Treasury securities with maturities equal to the expected life of the option; and an eight percent forfeiture rate is
assumed. The Company uses historical data in order to estimate forfeitures and holding period behavior for valuation purposes.
The fair value of stock option grants is estimated on the date of grant using the Black-Scholes option pricing model. The following
weighted average assumptions were used to value grants made in 2011, 2010 and 2009. The 2010 weighted average assumptions
include one million options that were granted as part of the merger.
2011
2010
2009
Average expected volatility ................................
.............................
38.4%
31.4%
32.8%
Dividend yield ................................................................
.................
2.5%
2.2%
2.8%
Risk-free interest rate ................................................................
.......
1.1%
2.7%
2.2%
Expected term ................................................................
..................
5.5 yrs
6.3 yrs
5.0 yrs
Fair value per option ................................................................
........
$ 18.29
$ 16.68
$ 11.48
Weighted average vesting period ................................
.....................
2.7 yrs
3.0 yrs
2.4 yrs
As part of the Merger, the Company exchanged the pre-merger stock options of Black & Decker for 5.8 million Stanley Black &
Decker stock options. The following assumptions were used in the valuation of pre-merger Black & Decker stock options:
2010
Average expected volatility ................................
.......................
32.0%
Dividend yield ................................
................................
0.7%
Risk-free interest rate ................................
................................
1.4%
Expected term ................................
................................
2.9yrs
Fair value per option ................................
................................
$18.72